A nearly US$37m loss on the sale of its intimate apparel business to Fruit of the Loom lowered VF Corporation's fourth-quarter net income below last year's.

Net income for the fourth quarter ended 31 December was $108.6m, or 95 cents a diluted share, down 14.8% from the last three months of 2005, when net income was $127.5m, or $1.13. Excluding the 33-cent-a-share after-tax loss on the sale of the intimates business and other unrelated charges, earnings per share from continuing operations were $1.27 versus $1.14.

Net sales rose 9.3% to $1.58bn from $1.44bn. On a percentage basis, the outdoor coalition had the largest sales increase (up 31.6% to $452.6m), followed by sportswear (up 7.8% to $197.2m). VF's jeans wear business grew 1.9% to $700m as softness in the mass channel was somewhat offset by strong sales of the Lee brand among middle-tier retailers. Lee's business in the US rose 16% during the quarter, VF said.

In fact, the jeans wear coalition saw its operating income drop 18% to $100.1m. Profitability was also hurt by actions to reduce product costs and improve product development processes.

Fourth-quarter gross margin was 43.2% of sales, up from 42.4% a year ago, as the company continued to benefit from the shift towards higher-margin lifestyle products.

For the full year, net income rose 5.3% to $533.5m, $4.72 a diluted share, from $506.7m, or $4.44, last year. Net sales rose 10% to $6.14bn from $5.58bn. In descending order of volume, jeans wear finished the year at $2.78bn, outdoor at $1.87bn, imagewear at $828.2m and sportswear at $685.5m.

VF said that it expects earnings per share from continuing operations to increase 10% in 2007, putting them slightly below analysts' consensus estimate. The shortfall led to declines in VF's stock in after-hours trading.

By Arnold J Karr.